Member Info for Hexam

Oke, my number is total distribution costs so includes everything. There is no more detailed breakdown in the accounts that I can see (apart from removal of exceptional costs which aren't that big). So no idea what they might be referring to in the call but in total the distribution costs as a % of revenue seem pretty flat (it's the admin costs that have risen sharply over the last couple of years).

Hi Oke,

Just confused by your numbers for distribution costs. I've got these as being an average of 24% for 2019-2022 and 25% for last year so not a big difference. All I'm doing is taking the distribution costs and revenues directly from the accounts - or have I simply misunderstood what you are referring to?

“Mangling growth, I think that description was used by Hexam about you t4g.”

Actually PP I did use that phrase but it was about SCB not T4G. I can’t make any comment about T4G’s posts as thankfully I can’t see them anymore.

All this discussion about past growth has got out of hand really and I’m sorry I was part of this. BOO grew rapidly which was great, this growth slowed (which was to be expected) and then turned negative which was probably largely due to some move back to high street sales following the pandemic.

So no great mystery and what is far more important is whether they can get back to growth and for that growth to be profitable. We should get a good view of whether they are on track to do that in the next update and an even better one at the full year results.

“I'm glad we agree that boohoo is a rapidly growing company with a healthy 4.4% profit after tax margin....”

We don’t. Boo is currently a shrinking company (revenue wise) with no profit it all. Suggest you read the most recent financials and outlook to confirm this rather than being stuck in the past. That’s mainly why the sp has dropped over 90% (no MM conspiracy theories needed here either).

It WAS a rapidly growing company but I wouldn’t call 4.4% profit margin healthy, just ok.

They are now targeting double digit growth and low single digit net profit margin (equivalent to 6-8% EBITDA) over the medium term and that should be enough to lift the sp if they achieve these and is one of the reasons I’m invested but I think the days of ‘rapidly’ growing (the 40%+ levels) are gone now. As Wolf says you can’t expect businesses to keep growing at that kind of rate). They now say they are more focused on the margins and rightfully so in my view.

Hopefully they are being cautious on margins, as Oke believes, which would be even better.

"If 4.4% profit after tax isn't a big enough margin then how have boohoo managed to grow? Magic beans?"

No magic beans needed, just access to capital like all new companies and most rapidly growing ones. As I mentioned already.

"T4g I was try to hint that with pepee using the profit after tax number, the growth had in fact already been "paid for""

I'm talking about future growth plans. If BOO are just limiting their growth to what they have already paid for then I would be shocked and disappointed. It's actually not true anyway as we know they still have quite chunky capex spend planned for this year.

In any event profit does not include capex - it is cash flow you should be looking at. Profit will only show most of the cost of investing for growth over time (as the assets purchased depreciate) by which time the benefits from that investment should also be coming through. It is only the costs of growth that aren't capitalised that will show up immediately in profits though even then if they are treated as one-offs they will be removed in the 'Adjusted' figures.

So your comment doesn't make sense whichever way you look at it.

I could easily post lots of company stats which show BOO in a very bad light (just focusing on the last 18 months would do the trick). They would be 'facts' but it would still make me a troll. A ramper cherry-picks the good bits no matter how relevant or not they may be. A troll cherry-picks the bad bits no matter how relevant or not they may be. Neither group are to be trusted.

Indeed you did say that but repeating it has no effect on me as luckily I'm immune to your shameless ramping and besides I don't need it in order to believe in BOO (though admittedly it's not a £6.50 kind of belief that I have).

""4.4% net profit margin is not enough to reinvest for future growth."

This comment has got me roaring with laughter.... Surprised hex isn't correcting this one😉... Come on hex balance the board and all that 😅😅"

For starters it may well be true, after all it produces far less than the capex spend this year. What makes you so sure it is comfortably enough for whatever BOO may have planned in the future? They can of course invest to grow in the short term without making any profit at all or even not having a positive FCF so long as they've got access to capital (which they certainly have for now). Ultimately though they need to make profits and whether 4.4% is enough to keep satisfying their ambitions longer term (or reward sufficiently those who invest) is questionable to say the least.

If you're going to scoff so smugly at other posters' comments you should at least check properly what they said first. As to balance I don't comment on everything silly of this board (that would be a sad kind of life) - or else I would have mentioned something about you mangling the meaning of the word 'growth', your misleading comparison with other retailers or repeating a pointless post of historic growth and missing out the recent fall and the further projected further drop this year which counts for far more than what was achieved in the past.

"My arguement was more to say that the potential EPS even if growth is dead (which I don't believe) is very nice, providing they can sort their margins out."

Yep, agreed.

No Broke, the EBITDA forecast of 6 to 8% doesn't include exceptional items nor do the additional items needed to get to net profits (interest, depreciation and tax). Historically 7% has indeed been the rough net profit margin but they're clearly not expecting to get back to that sort of level in the next few years and is one of the main reasons I think the sp is so depressed. Hopefully they'll outfperform though, as Oke thinks, and get back there quite a bit sooner!

Let's hope you're right with your conjecture Oke as that would certainly help the sp!

My own guesstimate would be 3.5% to 4% EBITDA margin and £50-£75m cash outflow so not as optimistic but prefer your answer :-)

I think H2 will be a lot better though.

*Their own...

Hi Broke,

There own medium-term forecast for EBITDA margin is 6 to 8% which translates at most (and probably quite a bit less than) the 3.5% net earnings margin that you call 'very low'. So whilst I agree with the maths you're actually assuming in there at least them hitting their targets on profit margins.

Hopefully they can hit, and exceed, these margins as well as getting back to growth. If they don't stay on course for at least this though then I think the sp will be stuck around this level.

That growth in revenue (up to 2022) is indeed impressive but it's what happens in the future that matters. If they can get back to growth in revenues and return to a profit then a £2bn valuation is very possible down the line. It's the uncertainty that they can get back to meaningful growth or profits that is depressing the sp though with clearly many seeing there is 'a way' that they won't get back to that sort of value. This is why I think the interims (and even more so the FY numbers) are so important. They could well give a lot of confidence that the glory days are coming back - or they may suggest they are gone forever.

Personally I don't think the interims will be that impressive or bad enough to be conclusive either way but have more hope for the end year numbers when more of a turnaround should be visible.

"Highly recommend green boxing and we can just focus on discussing data/ info in a constructive manner"

Yep, that would be nice rather than seeing the same question asked dozens of time or what some people were posting last year (or before).

If you don't think a poster adds value, or if they annoy you with their prolific posting, or both, why not just filter them? If you think you are 'saving' others from being influenced by their nonsense then surely if you think it's nonsense then it's unlikely they will be and if they are then quite frankly don't they deserve what they get?

Instead much of the board is made up of childish squabbling and leads me to think that most people only come on here simply because they enjoy doing just that.

And in the meantime, as Broke says, greats posts like Kachrafilter's get lost in the garbage.

Not sure why as BTC is a quite a bit higher than when UK closed yesterday. It's also higher than when US closed and as long as that holds then would expect the American miners to climb later today (and more so than ARB).

Seen it quite a lot lately - US miners remained leveraged with respect to BTC movements whereas any gains or losses in ARB appear more muted compared to moves in BTC. I think this just reflects its issues which go far beyond BTC price.

I would expect ‘gross profit’ margin to be up with positives from things like lower freight and cotton costs and from returns charging more than offsetting negative impacts of things like wage inflation and lower volumes.

But it’s impossible to say for sure as too many moving parts. Even more so when it comes to EBITDA and PBT.

Either way we’ll soon get to know when the interims come out whether margins are heading in the right direction but I would think they would have issued a warning by now if not and they were falling that far short of forecasts.

Yes agree HC though I think from Fred's point of view he's not as worried about a few (million) extra shares as we are but is pretty worried about shelling out the cash. So yes agree, it is a risk averse move but the risks are somewhat different for him (and MARA) than for us - if that makes sense. And agree it suggests that he is probably feeling less confident of BTC - or at least not so confident as to put that much of MARA's money where his mouth is.

"Boohoo are confirming their revenue by geographical region figures will continue to decrease for fy 2024"

I agree Oke that this clearly cannot be inferred from the RNS statement. The only thing that can be said for sure from their statement that revenue will be -5% to flat is that they expect at least one region to have declining sales. And even then they expect revenue to be grow in H2 so all regions may be improving again by then.

Looking at freight and cotton costs these have both clearly come down sharply (can see on the graph that cotton has indeed come down by around 50% from its recent peak). Looking at their accounts though the gross profit margin only went down by 1.9 percentage points in FY2023 with freight and raw materials cited and so with prices now returned to more normal levels (though still a bit high for cotton) would possibly expect this to reverse largely in FY2024. There is still pressure on other costs (e.g. wages) and revenues are expected to be flat at most which will also hit margins. There are other plusses and minuses on costs and margin too though (US DC, other distribution, returns fee etc.).

So lots of bits moving around but my own guess is that they may be being a little cautious on their 4 to 4.5% EBITDA forecast margin but not by much and that improvements will be more in H2. So personally I'll be happy with say 4.5% to 5% margin at H1 - but even happier if you are right Oke!

But for now I'll just wait and see as it's only a few weeks away now. So I'll focus now on what they actually are (and why) when they come out rather than guessing or debating anymore what they might be. Though it has been interesting (for me anyway).